Dubai's inflation rate eases in June to lowest this year

A drop in food and transport costs pushed down consumer prices

Fruits and vegetables at a supermarket in Dubai.

Dubai’s inflation rate slowed to 2.05 per cent annually in June, its lowest so far this year, as food and beverage prices as well as transport costs eased in the emirate.

The annual consumer price index released by the Dubai Statistics Centre found that food prices in June rose by 3.8 per cent annually, compared with 4.8 per cent in May.

Food prices have eased this year after rising sharply in 2022 following Russia’s invasion of Ukraine in February. The Food and Agriculture Organisation’s world price index declined in May to its lowest in two years as a drop in the prices of vegetable oils, cereals and dairy products offset an increase in sugar and meat prices.

Meanwhile, the CPI also found that the cost of transport in the emirate fell by 13.86 per cent last month, compared to a 7 per cent drop annually in May.

Tobacco prices fell by 8.11 per cent, while recreation, sport and culture dropped by 4.37 per cent on a yearly basis.

Housing, utilities and fuels, which accounts for the biggest part of the CPI at more than 40 per cent, rose 5.94 per cent yearly in June, up slightly from 5.74 per cent in May.

Dubai's property market has made a strong recovery from the coronavirus-induced slowdown on the back of government initiatives such as residency permits for retirees and remote workers, as well as the expansion of the 10-year golden visa programme and the economic gains generated by Expo 2020 Dubai and higher oil prices.

It registered strong growth in the first quarter, with total transaction value up 80 per annually to Dh157 billion ($42.75 billion), according to official data. The number of transactions also rose 49 per cent during the period to 38,715.

Dubai's economy has been expanding. It is estimated to have grown 5 per cent last year and is forecast to increase by 3.5 per cent in 2023, according to Emirates NBD.

Business activity in its non-oil private sector economy rose to a 10-month high in June, boosted by a sharp rise in sales and new orders as demand growth quickened.

The emirate's seasonally adjusted S&P Global purchasing managers' index reading rose to 56.9 in June from 55.3 in May, marking the strongest overall improvement in operating conditions in the non-oil sector since August 2022.

The headline index remained well above its long-run trend level of 54.6, with the month-on-month rise of 1.6 points the largest recorded since October 2021.

Inflationary pressure in the UAE is expected to decline further in 2023 as the Arab world's second-largest economy maintains its robust growth momentum, the UAE Central Bank said in May.

Average headline inflation in the UAE stood at 4.8 per cent in 2022, significantly below the world average of 8.8 per cent last year that was driven higher by rising interest rates and commodity price fluctuations.